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Newsletter | Articles BVI new legislation clarified We had a lot of feedback from our recent Dossier article about the new BVI legislation concerning bearer shares, registers of directors, authorised custodians etc., mostly from people who were confused. The BVI Government has now issued answers to questions which clarify certain aspects of how the new law will operate. We print these here verbatim as a supplement to our original mailshot about the BVI law. What follows is the BVI government’s answers to questions raised by the Association of Registered Agents recently and explain where the operation of the law and its interpretation is likely to differ from the original text of the law itself. “There continues to be some disquiet and misrepresentation over the implementation of the provisions of the International Business Companies (“IBC") (Amendment) Acts of 2003 and 2004 and the Financial Services Commission (Amendment) Act of 2004. In an effort to give clarity to the questions being asked, the FSC has provided a special supplement of answers to frequently asked questions (FAQs) on the immobilisation of bearer shares regime. Questions When will the Financial Services Commission (Amendment) Act 2004 come into effect? The Financial Services (Amendment) Act 2004 came into effect on 1 July 2004. When will the International Business Companies (Amendment) Acts of 2003 and 2004 come into effect? Both will come into effect on 1 January 2005. What is the deadline for maintaining a register of directors at an IBC’s registered office? IBCs incorporated before the IBC (Amendment) Act 2003 comes into force on 1 January 2005 will have up to 12 months, i.e. up to 1 January 2006, to establish and maintain a Register of Directors. IBCs incorporated after the 1 January 2005 will be required to comply with Section 10 of the IBC (Amendment) Act of 2003. Good practice suggests, and the FSC strongly encourages, all Corporate Service Providers (Registered Agents) to begin the process now of establishing and maintaining a Register of Directors for all IBCs. This will ensure a smooth transition. Is there a deadline for companies incorporated prior to 1, January 2005 to appoint Directors? (referring to the requirement for newly incorporated companies to appoint Directors within 30 days as of 1 January 2005) Please refer to Question 3 What will be the consequences of non-compliance with the requirement to file the Register of Directors within 30 days of incorporation? In other words, how will this requirement be enforced? You will be exposed to the consequences provided for non-compliance by the Act. What does the statement “for the first four years of the transitional period, the situation will essentially stay as it is for existing IBCs” mean? Please refer to the Commission’s Statement on Fees at the end of this FAQ Registry Will companies incorporated on or after 1, January 2005, whose M+AA prohibit the issue of bearer shares, have to file the declaration that no such shares are in issue, upon incorporation? IBCs incorporated on or after 1 January 2005 whose M+AA prohibit the issue of bearer shares will not be required to file the declaration. Who can file the declaration that no bearer shares are in issue? Would it be acceptable for the Registered Agent to file an Affidavit confirming that the declaration has been made by the Directors/Members of the company and that it is kept on file at the registered office? (At issue here is the preservation of confidentiality of the names and identities of directors and shareholders). Any person who is empowered or authorised in writing to act on behalf of the company may file the declaration. It is acceptable for an Affidavit to be filed by the Registered Agent. What is the terminal date for filing of the declaration for companies that amend their M+AA to prohibit the issue of bearer shares? 31 December 2010 for companies incorporated prior to January 1, 2005. Companies incorporated on or after January 1, 2005 must file the declaration on the same date that they amend their M+AA to prohibit the issue of bearer shares. Will companies incorporated prior to 1, January 2005 be required to file the said declaration? If so, be when? Where is this requirement stated? Please refer to Question 11. IBCs incorporated prior to 1 January 2005 whose M+AAs provide the power to issue bearer shares and who, during the transition period, amend their M+AA to prohibit the issue bearer shares are required to file the declaration that no bearer shares are in issue. This is stated in the IBC (Amendment) Act 2004. The Act refers to the amendment of the “Memorandum” but does not refer to the amendment of the “Articles”? Do the Articles also have to be amended? The Articles should also be amended to delete references to bearer shares, as it is presumed that the Articles will be consistent with the “Memorandum”. Is there a statutory document/release giving effect to the “transition period” or “transition date”? The IBC (Amendment) Act 2004 is the statutory document giving effect to the “transition period which ends 31 December 2010. Do the “transition periods/dates” apply to only the immobilisation of bearer shares or to the whole IBC (Amendment) Act 2003? The transition period is applicable to the immobilisation of bearer shares. However, if at the expiration of the transition period a company retains the right to issue bearer shares is would be subject to the payment of increased licence fees. During the first four years of the transitional period, should bearer shares be held by a custodian? Companies incorporated prior to 1, January 2005 have up to 31, December 2010 to ensure that all issued bearer shares are held by a custodian. Companies incorporated after 1, January 2005 whose M+AA do not prohibit the issue of bearer shares should deposit all bearer shares with a recognised or authorised custodian from their date of issue. What does the phrase “existing IBCs” mean? Existing IBCs means companies incorporated prior to 1 January 2005, the effective date of both the IBC (Amendment) Acts 2003 and 2004. What happens at the end of the transition period ending 31, December 2010? At the end of the transition period, all IBCs should be in full compliance with the provisions of the Act relating to the immobilisation of bearer shares. Effectively, all bearer shares issued should be deposited with custodians and those IBCs that still retain the power to issue bearer shares in their M+AAs will be required to pay a premium for this option. Will it be possible for companies that have bearer shares in issue, to amend their M&A to prohibit the future issue of bearer shares whilst still keeping in issue the bearer shares issued prior to the amendment? If so, how will the provisions of the Act affect these companies? The 2004 Amendment Act does not contemplate this scenario as it provides that a company that amends its Memorandum to prohibit the issue of bearer shares is required to file a declaration that it does not have bearer shares in issue. Which of the following requirements does the transition period relate to: The requirement to amend the memorandum and articles; or The transfer or placement of bearer shares with a custodian; or To both the requirement to amend the memorandum and article of association and the transfer or placement of bearer shares with a custodian. “(c)”. Please also refer to Question 13. Is a consolidated version of the IBC Act, including all amendments to date available anywhere? If so, where can it be obtained? If not, will it be made available at some point? No official consolidation currently exists. The enacting and distribution of legislation is handled by the BVI Government. The process is an ongoing one which the Commission is monitoring. As soon as a consolidated version becomes available, the Commission will notify how it can be obtained. Commission’s Statement on Fees The IBC (Amendment) Act 2004 establishes the principle that companies which elect to retain the power to issue bearer shares will be charged a premium licence fee over the fee payable by companies that do not retain this power. The BVI Government has accepted there should be a transitional period for existing companies to come into line with the provisions of the 2004 and 2003 Amendments to the OBC Act. The premium licence fee will thus not immediately apply to companies on the Register prior to 1 January, 2005. These will have up to 31 December 2010 either to remove the power to issue such shares or to start paying the premium licence fee. However, the Government has indicated that it will consider giving legal effect to the recommendation of the special panel that a modest increase be added to the licence fee for those companies that retain the power to issue bearer shares during the final three years of the transitional period i.e. after 2007. This is intended to serve as an incentive to prohibit the issuing of bearer shares before 2010 by those companies that neither have issued such shares nor intend to issue them.” We will consolidate this material into an area on our website for your guidance. We do recommend that you consider acting now and will be happy to assist.